- GBP/USD hit a nearly two-week high above the 1.3200 level on Tuesday, rising as much as 0.7% to 1.3250.
- The pair has been supported by the strength of risk appetite as global equities rise, resulting in a weaker USD.
- GBP/USD break above 1.3160-1.3200 resistance could be a key technical level but UK fundamentals are weak.
The GBP/USD it hit a nearly two-week high above the 1.3200 level on Tuesday, rising as much as 0.7% to 1.3250, as continued bullish momentum in global equity markets spurred risk appetite in currency markets. Although still well supported against its safe-haven pair (JPY), the US dollar’s strength following Fed Chairman Jerome Powell’s hawkish line on Monday has proven short-lived against most crosses. of the G10. While markets are increasing their bets on a more aggressive and far-reaching Fed tightening cycle, optimism that the new policy shift is “appropriate” given the backdrop of high inflation and an active US labor market appears to be on the rise. backing up the sentiment.
Continued improvement in risk appetite, to which the British pound is usually quite sensitive, has been able to overcome recent dovish BoE-related weakness in GBP/USD. Of course, that means that if global equities start to sell off again, the pair is at risk of giving up 1.32 once again. There are still plenty of reasons why there could be a quick reversal to the downside in stocks; the Russo-Ukrainian war (perhaps Russia will start dumping chemical weapons), a tightening of Western sanctions against Russia (potential EU embargo on Russian oil), and a worsening of the Covid-19 outbreak in China, to name a few. .
GBP/USD break above the key resistance in the 1.3160-70 area and the 1.3200 level is a key technical level that paves the way for a push towards 1.3300. In fact, the pair has already bounced off resistance in the form of late February/early March lows in the 1.3275 area. While the main driver of GBP/USD at present is a risk appetite story, if that goes back to currency fundamentals and central bank divergence, the UK economy’s comparatively weaker position and comparatively Dovish comments from the BoE weaken the prospect of a sustained recovery.
Looking to the immediate future, the focus is on February UK consumer price inflation data scheduled for release on Wednesday, followed by another speech from Fed Chairman Powell ahead of UK flash PMIs. UK and US on Thursday.
Additional technical levels
Source: Fx Street
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